Pre-construction condos are one of the best ways to get into the Toronto Real Estate market and make money. Whether it’s a condo for you to live in, a condo to flip, or one to hold and rent, there is money to be made for every type of buyer – from first-time condo buyers to seasoned investors and even downsizers looking for financial freedom later in life.
The pre-construction market isn’t what it was five years ago, where any investment purchase was nearly a guaranteed win. Today, you need education on developer reputation, and a solid analysis of projected valuations in order to know if your choices are good ones.
How Working with a Pre-Construction VIP Broker Benefits You
Working with a real estate broker who understands pre-construction condos and the pre-construction market is the number one step any buyer can take. This is true even for a seasoned investor, but especially true for a first-time-buyer. You need to have someone in your corner that represents your best interests.
Did you know the developer pays any and all realtor fees associated with your pre-construction condo purchase? It doesn’t cost you anything – $0.00 – to have a professional in your corner. Working with a seasoned broker who has financial expertise can ensure you don’t get caught in a bad purchase with a bad development that’s not going to make you any money.
A seasoned pre-construction broker will know about assignment clauses, deposit structures, levy caps – all critical elements that go far beyond picking finishes and signing on the dotted line.
If you’re thinking about pre-construction but don’t know where to start or how it can work for you, let us help.
Pre-Construction Condos – Deposit: How Can I Save for It?
Many first-time pre-construction buyers face a similar challenge – saving up the deposit that is required to make a purchase. Although you don’t need the money all at once, you will need between 10% and 20% of the purchase price, that is usually spread out over 5% increments.
Some of the best ways to get your deposit money are through:
- A Line of credit: securing a line of credit will give you the freedom to purchase while making small monthly payments at a relatively low interest rate.
- The bank of mom and dad: asking mom and dad for help is sometimes an option. How about a graduation present of helping you purchase your first condo? Perhaps even a wedding gift.
- Savings: have you been saving for a big purchase? No other investment pays back more than an investment in real estate.
- Poor performing stocks: if you’re sick of watching your stocks do nothing maybe it’s time to reallocate some of those funds into an investment that will show you a substantial return in just a couple of years.
- Leverage your current home equity: if you’re already living in your personally-owned home, it’s worth looking into using some of that built-up equity towards expanding your real estate portfolio.
- A combination of options: think a few of these can work? Look into all of them and combine efforts!
Savings + bank of mom and dad = pre-con deposit.
How Do I Know What Building to Buy In?
Another challenge facing today’s saturated pre-construction condo market is sorting through the success-factors that make a good project. As a buyer, it’s hard to know what to watch out for, and the numerous things that make a good project a worthwhile investment.
- Work with an agent that can crunch the numbers: look for a pre-construction broker who has a solid financial background (as we do) who can project your profitability and forecast your return on investment.
- Know the developer history: developer reputation has become a critical factor in projecting the success of a project, and therefore, your profit. Some developers have a tarnished history of bad buildings, project cancellations or poor timelines for project completion dates.
A good broker will have relationships with good developers and know who the bad ones are in order to steer you in the right direction. - Neighbourhood Trends: knowledge of Toronto neighbourhoods is a must when examining the return on pre-construction condo investments. Trends predict success rates and profitability. They also determine if the current selling rate is worth your dollars, or if the pre-construction project is already selling above predicted future market rates.
My Pre-Construction Condo is Complete – Now What?
Once your suite is near completion, it’s time to decide what to do next. There are numerous options to review and getting the advice of your broker can help you make a confident decision.
- Move in as primary residence: if you’ve purchased the condo with the intent of moving it, it’s now time to confirm your mortgage and proceed like any principal residence. If it’s your first purchase, your realtor should be able to outline the rebates you qualify for ($$$).
- Become a landlord: if this is an invest and hold purchase, you have the option of becoming a landlord. There are many benefits to this option – the biggest one being your tenants paying off your mortgage while your equity and value increase month-by-month.
- Sell it: if selling the unit for a profit without securing a mortgage is your #1 strategy, you’ll want your Real Estate broker to educate you on assignment sales and the upside to selling before occupancy. By doing so, you’ll free up the cash to be made, recoup your deposit and be able to move on to the next opportunity.
Be sure to work with an agent that has proven experience with assignment sales. They are overwhelming to most, but those who know how they work can create a winning strategy for you and show an exceptional return on your deposit investment.
Making Money Through Pre-Construction Condos
We have over 10 years of experience helping clients invest in pre-construction condos and we’re happy to say, they have all made money. And they continue to invest in pre-con condos to make even more money. Need proof? We’ve pulled together two examples. The first is of how one client made money on a purchase at 75 on the Esplanade. The second is our projections for an exceptional project by Lifetime Developments going up in Liberty Village – XO Condos.
If you want to discuss how you can start making money by investing in pre-construction condos, like many of our clients, just shoot us an email or simply complete the form below. We can meet, discuss a bespoke strategy that works with your timelines and budget, and show you how investing in condos now can make you money for many years to come.